Amargianitakis and Australian Securities and Investments Commission

Amargianitakis and Australian Securities and Investments Commission [2015] AATA 720 (17 September 2015)

Division

TAXATION & COMMERCIAL DIVISION

File Number(s)

2014/6261

Re

Dimitri Amargianitakis

APPLICANT

And

Australian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal Professor R Deutsch, Deputy President

Date 17 September 2015

Place Sydney
The Tribunal varies the Respondent’s decision under review by reducing the period the Applicant is prohibited from providing any financial services from eight years to six years.

.....................[sgd]...............................................
Professor R Deutsch, Deputy President
CATCHWORDS
CORPORATIONS – banning order – length of ban – decision varied
LEGISLATION
Corporations Act 2001 (Cth) ss 9, 761A, 761E, 761G, 761GA, 764A, 766A, 766B, 766C, 911A, 911B, 920A, 920B, 941A, 941B, 944A, 945A, 946A, 946B, 1041H

Corporation Regulations 2001 (Cth) reg 7.6.01
CASES
Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80
REASONS FOR DECISION
Professor R Deutsch, Deputy President
17 September 2015
INTRODUCTION

This case involves an application for review by the Applicant of a decision made by the Respondent to ban the Applicant from providing any financial services for a period of eight years.
FACTS
General Background
The Applicant arrived in Australia from Greece in 1976.
Between 1978 and 1985 he studied for a Bachelor of Business with a sub-major in commercial law.
He was at all relevant times a public accountant and he commenced his own accounting practice under the name Akis & Associates in 1987. Although his initial foray into the world of accounting amounted to a practice run from his home garage, he very quickly built up a substantial practice to a point where he had about 200 clients. He worked closely with his clients and knew them and their affairs very well.
He was, until fairly recently, a member of the Institute of Public Accountants.
He is currently working at an accounting firm owned by his daughter where he works as an accountant and tax agent.
Property Development Activities
Through his work, he participated in what can best be described as the finance industry, and through that participation he met many property developers and potential investors, especially in Queensland.
At various times, he was a director of two companies called Vista Capital Pty Ltd (Vista) and Vista Capital Solutions Pty Ltd (VCS) and Vista was also the trustee of the Akis Finance Services Unit Trust (the Trust) which was specifically created to service a growing demand for finance.
Through his connections, he organised for the Trust to invest in various property developments in Queensland and for people he knew to participate in such property developments through their involvement in the Trust as lenders to the Trust.
For some considerable time the developments were very successful and healthy profits were made. It seems to be generally agreed that the Applicant successfully orchestrated the borrowing of funds and the associated property investments for the benefit of all the participants over a number of years without any complaint or complication.
Funds were raised by way of deeds of loan from over 100 individuals, superannuation funds, companies and trusts who were either clients of or associated with Akis & Associates.
The situation, however, began to deteriorate from around 2006. At that time it appears that credit markets began to tighten and property prices began to fall. All this had an obvious impact on the activities undertaken and the investments in which the Applicant and the associated companies were involved.
The Final Stages
On 17 August 2011, liquidators were appointed to both Vista and VCS. The winding-up took place in circumstances where the persons who had invested money with Vista were owed approximately $32 million.
On 16 November 2011, the Applicant lodged a debtor’s petition with Insolvency and Trustee Service Australia.
On 22 September 2014, the Respondent served on the Applicant a notice giving him an opportunity to appear at a hearing and make submissions as to whether an order prohibiting him from providing any financial services should be made against him pursuant to section 920A of the Corporations Act 2001 (the Act).
On 22 October 2014, the Applicant attended a hearing and made submissions.
On 25 November 2014, a delegate of the Respondent made an order pursuant to sections 920A and 920B of the Act banning the Applicant from providing any financial services for a period of eight years.
On 4 December 2014, the Applicant applied to this Tribunal for a review of the Respondent’s decision.
The Company Details
As indicated above, at various times, the Applicant was involved with three separate but related entities. The relevant details of these three entities and the Applicant’s involvement with each can be summarised as follows:
(a)Akis & Associates Pty Limited (Akis):
(i)Between 27 April 1988 and 19 October 2011, the Applicant was a director of Akis and from 25 August 2000 the sole director.
(ii)Between 25 August 200 and 19 October 2011, the Applicant was the sole secretary.
(iii)At most relevant times, the Applicant and his wife held 80% of the shares in Akis.
(iv)Between 26 May 2011 and 18 March 2013 a receiver/manager was appointed to Akis.
(v)Akis operated as an accounting firm and it had many clients including individuals, superannuation funds, companies and trusts.
(b)Vista Capital Pty Ltd (Vista) (previously Pakair Pty Limited):
(i)Between 2 April 1992 and 15 November 2011 the Applicant was a director of Vista.
(ii)Between 6 April 2011 and 15 November 2011 the Applicant was the sole secretary.
(iii)At all relevant times the Applicant and his wife have held all the shares in Vista.
(iv)On 11 May 2011 an administrator was appointed to Vista and on 17 August 2011 a liquidator was appointed by a resolution of the creditors.
(v)Vista raised money in particular from Akis’s clients and used the money so raised to invest in property developments, motels, mezzanine finance and mortgage lending.
(vi)It also acted as the trustee of two trusts namely the Akis Finance Services Unit Trust and The D & E Investments Unit Trust.
(vii)Upon liquidation Vista owed over $30 million to those it had raised money from.
(c)Vista Capital Solutions Pty Ltd (VCS) :
(i)Between 8 February 2007 and 3 July 2009 and 27 April 2011 and 16 November 2011, the Applicant was a director of VCS.
(ii)Between 8 February 2007 and 16 April 2007 and 27 April and 16 November 2011, the Applicant was the secretary.
(iii)At all material times the Applicant has been the sole shareholder of VCS.
(iv)Some of the evidence (see the affidavit Tammy Mead) suggests that at least some money was advanced to VCS. The amount in question was significantly less than the amounts lent to Vista.
(v)On 11 May 2011 an administrator was appointed to VCS and on 17 August 2011 a liquidator was appointed by a resolution of creditors.
THE LEGISLATION
The relevant provisions are contained in the Act. The provisions concerning banning orders are extracted below:
920A ASIC’s power to make a banning order
(1)ASIC may make a banning order against a person, by giving written notice to the person, if:
…
(d)   ASIC has reason to believe that the person is not of good fame and character; or
(da) ASIC has reason to believe that the person is not adequately trained, or is not competent, to provide a financial service or financial services; or
(e)   the person has not complied with a financial services law; or
(f)    ASIC to has reason to believe that the person is likely to contravene a financial services law; or
(g)   the person has been involved in the contravention of a financial services law by another person; or
…
(1A)In considering whether, at a particular time, there is reason to believe that a person is not of good fame or character, ASIC must (subject to Part VIIC of the Crimes Act 1914) have regard to:
(a)   any conviction of the person, within 10 years before that time, for an offence that involves dishonesty and is punishable by imprisonment for at least 3 months; and
(b)   whether the person has held an Australian financial services licence that was suspended or cancelled; and
(c)   whether a banning order or disqualification order under Division 8 has previously been made against the person; and
(d)   any other matter ASIC considers relevant.
…
(2)However, ASIC will may only make a banning order against a person after getting the person an opportunity:
(a)   to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b)   to make submissions to ASIC on the matter.
…
920B What is a banning order?
(1)A banning order is a written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities.
(2)The order may prohibit the person against whom it is made from providing a financial service:
(a)   permanently; or
(b)   for a specified period, unless ASIC has reason to believe that the person is not of good fame or character.
…
THE BANNING ORDERS AND THE GROUNDS RELIED UPON BY THE RESPONDENT
The Applicant has made various concessions and acknowledges that a banning order of some duration is warranted. However, he believes that the ban should be no longer than a period of some three years.
The Respondent’s position fundamentally is that a ban of something more like eight years is warranted and is pressing for such a decision. Oddly, the Respondent has also sought to now argue that the Applicant was not of good fame and character but such a finding would necessitate a permanent ban so in that sense there is some inconsistency in the approach adopted by the Respondent. The argument regarding good fame and character does not appear to have been pursued by the original decision-maker.
I make certain comments below regarding the question of good fame and character but I note for the record in this respect that the Respondent is not seeking the imposition of a permanent ban.
I will now consider each of the grounds asserted by the Respondent.
The Respondent has identified seven separate grounds for imposing the ban. The Respondent’s position in relation to each ground is set out below[1].
[1] References to T-documents and witness statements in this section are as contained in the Respondent’s Statement of Facts and Contentions dated 13 March 2015.
Banning Order Ground 1 – s 920A(1)(g)
Under this ground, the Respondent asserts that the Applicant has been involved in the contravention of a financial services law by another person, namely Vista in that:
(a)Vista raised about $36 million from investors pursuant to deeds of loan over a period of time stretching from about 2000 to 2011. The deeds of loan were a debenture, a security and a financial product. Vista issued (and later managed) the loans, was dealing in a financial product and providing a financial service: ss 9, 761A, 761E, 764A(1)(a), 766A(1)(b), 766C(1)(b)[2];
(b)Vista recommended to investors that they lend money to it pursuant to deeds of loan. Vista intended the recommendations to influence the investors to loan money to it, or could reasonably be regarded as being intended to have such an influence. Vista provided financial product advice and a financial service: ss 766A(1)(a), 766B(1)[3];
(c)Vista carried on a business of providing financial services in Australia.
(d)Vista did so at all relevant times during which it:
·did not hold an Australian financial services licence;
·was not an authorised representative of an Australian financial services licensee; and
·was not otherwise able to provide financial services: ss 911A(1), (2), Corporation Regulations 2001 reg 7.6.01(1)[4];
[2] T-docs pp 37, 233-238, 1174; examples of deeds of loans at T-docs pp 434-436, 450-453, 485-488, 505-510, 580-583, 643-646, 722-725, 866-898, 1010-1013, 1026-1033, 1107-1138, 1054-1057
[3] T-docs pp 37, 1174
[4] T-docs pp 38, 1174
The Respondent takes the view that the Applicant was involved in the contravention of s 911A(1) by Vista and asserts that this is supported by the evidence[5].
[5] T-docs pp 38, 1174
Banning Order Ground 2 – s 920A(1)(e)
Under this ground, the Respondent asserts that the Applicant has not complied with a financial services law in that:
(a)Vista carried on a financial services business, as above.
(b)The Applicant provided financial services in Australia on behalf of Vista and he:
·did not hold a financial services licence;
·was not an authorised representative; and
·was not otherwise able to provide financial services: ss 911A, 911B[6]; and
(c)The Applicant contravened s 911B[7].
[6] T-docs pp 39, 1174
[7] T-docs pp 39, 1174
Banning Order Ground 3 - s 920A(1)(e) and (f)
Under this ground, the Respondent asserts that upon the assumption that Vista and the Applicant were licensed or authorised to provide financial services, the Applicant was involved in the contravention of a financial services law by another person and/or has not complied with a financial services law in that:
(a)Most investors were clients of Akis. Some had modest income and assets and relied upon the Applicant. They were retail clients: ss 761G, 761GA;
(b)Vista provided personal advice to the investors to lend money to it pursuant to deeds of loan, and later to leave their money with Vista and not require repayment: s 944A;
(c)Vista did not determine the relevant personal circumstances in relation to giving the advice and/or make reasonable inquiries in relation to those personal circumstances and/or give such consideration to and conduct such investigations of the subject matter of the advice as was reasonable in the circumstances: s 945A(1)(a), (b);
(d)The advice was not appropriate to the investors, having regard to that consideration and investigation: s 945A(1)(c);
(e)Vista did not give the investors a Financial Service Guide or Statement of Advice: s 941A, 941B, 946A;
(f)The Applicant was involved in the contravention of ss 945A(1), 941A, 941B and 946B by Vista and/or contravened those sections; and
(g)The Applicant did not advise investors to take independent financial or legal advice[8].
[8] Witness statements of Wolter Bron, Tammy Mead and Judith Eldridge; T-docs tabs 15, 17, 21, 24; cf T-docs pp 87-101, 164, 166-183, 185-199, 201-211, 214-231.
Banning Order Ground 4 – s 920A(1)(e)
Under this ground, the Respondent asserts that the Applicant has not complied with a financial services law in that:
(a)The Applicant represented to Mr Bron and/or Ms Rockendorfer that:
(i)If Mr Bron lent money to Vista, Vista would on-lend the money secured by first mortgages;
(ii)If Mr Bron invested with Vista, there was little or no risk[9];
[9] Statement of Mr Bron.
(iii)Investing with Vista was very safe and of no risk;
(iv)Money on-lent by Vista was secured against houses and other property and that Vista took the title deeds as security;
(v)Vista’s investment were going well or doing fine; and
(vi)It was in Mr Bron’s and Ms Rockendorfer’s best interests to keep their money with Vista[10];
[10] Statement of Mr Bron at [12]-[13], [27], [33], [39], [45], [48].
(b)The Applicant represented to Ms Mead that:
(i)He could help her with a safe investment, which was safe because it was secured;
(ii)The loans made by Vista were short-term; and
(iii)Ms Mead should invest more with Vista and keep her money with Vista, it would make her better off and the repayments would provide her with a better lifestyle[11];
(c)The Applicant represented to Mrs Eldridge and Mr Eldridge that if they invested with Vista, they would not lose any money[12];
(d)The Applicant did not advise, or adequately advise, Mr Bron, Ms Rockendorfer, Ms Mead and Mr and Mrs Eldridge of the risks of lending money to Vista[13];
(e)The Applicant represented to Mr Bron, Ms Rockendorfer, Ms Mead and Mr and Mrs Eldridge, his accounting clients, that lending money to Vista was an appropriate and advisable investment for them;
(f)In making the representations, the Applicant engaged in conduct, in relation to a financial product or financial service that was misleading or deceptive or likely to mislead or deceive: s 1041H; and
(g)The Applicant contravened s 1041H.
[11] Statement of Ms Mead at [8], [10], [24], [26], [43].
[12] Statement of Mrs Eldridge at [13]-[14].
[13] Statements of Mr Bron at [14], [15], [17], [34], [36], Ms Mead at [9], [14], [35] and Mrs Eldridge at [18]-[19].
Banning Order Ground 5 – s 920A(1)(da)
Under this ground, the Respondent asserts that the Applicant is not adequately trained or is not competent to provide financial services in that:
(a)the Respondent relied upon the allegations above;
(b)the Applicant’s membership of the Institute of Public Accountants is suspended; and
(c)the Applicant has limited understanding of the obligations of a financial services licensee or authorised representative[14].
[14] T-docs pp 1196-1197, 1199-1200, 1216.
Banning Order Ground 6 – s 920A(1)(d)
Under this ground, the Respondent asserts that the Applicant is not of good fame and character relying on the allegations above.
Banning Order Ground 7 - s 920A(1)(f)
Under this ground, the Respondent asserts that the Applicant is likely to contravene a financial services law relying on the allegations above.
THE APPLICANT’S POSITION IN REGARD TO EACH GROUND[15]
[15] Applicant’s Outline of Submissions, 4 June 2015
Grounds 1, 2 and 5
For the most part the Applicant confirmed that he accepted a number of contentions put forward by the Respondent, most particularly grounds 1, 2 and 5.
Ground 3
The Applicant states that he viewed his dealings with the parties lending to Vista as amounting to nothing more than him offering to his clients the opportunity to obtain very good rates of return on their money and he did not see these dealings as providing any personal financial advice and viewed his proposals as being a commercial decision for the clients to either accept or reject.
The Applicant asserts that his intentions were always honourable and positive and for many years his clients obtained a good rate of return, including those who gave evidence against him in these proceedings.
The Applicant accepted without hesitation under cross-examination that he did know about his clients’ financial affairs and his simple consideration of whether or not the investments were good for the clients was his view that all loans are good for the investors obviously as a result of them making superior returns on the money compared to the risk.
The Applicant states that he did not consider the loans to be high risk due to the many years of successful lending made by Vista and being able to pay a good return to the investors.
The Applicant disputes that he gave any advice or made any recommendations to the lenders and he was consistent under cross-examination in his replies to the effect that he did not believe that he was providing financial advice to the clients.
The Applicant asserts that there is no evidence that any of the lenders commented to the Applicant at any time that they were relying on his advice or recommendations. The Applicant further asserts that the lenders never held out to him that they considered the Applicant to be their investment or financial adviser.
He accepts that he did not recommend to clients that they seek separate or other financial advice about the loans or investments that Vista was offering. By the same token there is no evidence to suggest according to the Applicant that the lenders were in any way discouraged from seeking advice from other advisers, including any lawyers.
Ground 4

The Applicant denies that he was dishonest or deceptive in making any comments or representations to the lenders. In particular, the Applicant denies intentionally misleading or deceiving the lenders on matters such as there being “no risk” and that the loans were secured by first mortgages. He also denies any suggestion that he told the lenders that the investments were going well when they were not.
Ground 6
The Applicant disputes the contention that he is not a person of good fame and character and in support submitted many references. Two referees were cross-examined at the hearing.
Ground 7
The Applicant disputes that he is likely to contravene a financial services law in the future, as a result of his awareness of the rules, the publicity surrounding the failure of Vista, the time and cost of all the proceedings with ASIC and the existence of the checks and balances in the system.
THE TRIBUNAL’S CONSIDERATION IN RESPECT OF EACH GROUND
Ground 1
For the most part the Applicant did not dispute this ground. The Applicant conceded that Vista was dealing in a financial product and providing a financial service and that Vista contravened s 911A of the Act which requires that “a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services.” It was also conceded that the Applicant was involved in Vista’s contravention of s 911A.
The only contentious issue between the parties in respect of this ground was as to whether what Vista had put to the prospective lenders was a recommendation. The Respondent asserts that what was put was a recommendation whereas the Applicant denies that was the case.
Sections 766A and 766B of the Act state:
766A When does a person provide a financial service?
General
(1)For the purposes of this Chapter, subject to paragraph (2)(b), a person provides a financial service if they:
(a)   provide financial product advice (see section 766B); or
…
766B Meaning of financial product advice
(1)For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:
(a)   is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or
(b)   could reasonably be regarded as being intended to have such an influence.
…
(2)There are 2 types of financial product advice: personal advice and general advice.
(3)For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where:
(a)   the provider of the advice has considered one or more of the person’s objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or
(b)   a reasonable person might expect the provider to have considered one or more of those matters.
(4)For the purposes of this Chapter, general advice is financial product advice that is not personal advice.
…
The evidence of three of the witnesses called by the Respondent and even the evidence of the Applicant himself, referred to below, lead me to the conclusion that some form of recommendation was made by Vista which did influence the witnesses in the making of their decisions.
Ground 2
The Applicant does not dispute this ground.
Ground 3
This ground raises the question as to what both Vista and the Applicant would have been required to do if they were properly licensed and authorised.
The parties that are involved in lending money to Vista were generally speaking individuals, self-managed superannuation funds and family businesses. The Applicant knew a great deal about the financial affairs of the entities involved as he was the accountant to the entity in question, in most cases for many years. From the available evidence, it would appear that the Applicant did not suggest specifically that the entity in each case speak to a financial planner although he did assert in his written statement that he indicated that they should speak to a solicitor. No concrete evidence was offered to support that assertion beyond the written statement of the Applicant himself.
It is conceded by the Applicant that neither Vista nor the Applicant gave prospective lenders a Financial Services Guide. However, the Applicant denied the suggestion that prospective lenders were relying upon him for advice in relation to the loans.
The Respondent called three witnesses to provide evidence at the hearing.
The first was Mrs Eldridge. It seems that in about 2003 the Applicant spoke to both Mrs Eldridge and her husband, Mr Eldridge, about lending money to Vista at a time when they were both close to retirement age. She was in her mid-50s and Mr Eldridge was a little older. They owned their own home but no other assets and had a combined income of approximately $50,000 a year. The money they were putting with Vista was essentially their superannuation and some compensation money which was largely money they were relying upon for their retirement.
Mr and Mrs Eldridge progressively lent hundreds of thousands of dollars of superannuation and compensation money to Vista and this lending was still going on well into 2010.
The second witness called was Mr Bron who together with his partner, Ms Rockendorfer, had lent money to Vista in two stages - the first was a loan of most of their superannuation money amounting to approximately $100,000 which was lent in one sum to Vista. In 2005 they lend a further sum at a time when their combined income was in the range of $60,000 per year. According to Mr Bron’s evidence, they were having difficulties securing employment at that time and the Applicant appears to have been well aware of that situation.
The third witness was Ms Mead who also lent money to Vista in stages – the first was a loan of approximately $250,000 being the proceeds of her divorce settlement.
She was at that stage a stay at home mother of two young children and was in receipt of approximately $50,000 per year in child support.
In what appears to be uncontradicted evidence, in 2008 the Applicant approached Ms Mead with a suggestion that she should borrow against her home and on lend the money to Vista. Ms Mead in all borrowed and on lent to Vista about $500,000.
The evidence indicates that even through the Applicant’s own admissions that the Applicant did not consider the appropriateness of the proposed loans to Vista. He certainly appears to have given scant regard to the particular specific circumstances of any of these witnesses.
Bearing in mind the individual circumstances of the lenders, it is clear that the Applicant’s discussions with these lenders failed to accord with what might reasonably be expected of someone in his position and with his knowledge and understanding of their individual circumstances.
According to the Applicant, he did not consider the loans to be high risk due to the many years of successful lending by Vista and the fact that it was able to pay good returns to the lenders to it.
He denies the assertion that he gave advice or made recommendations to lenders and he did not believe that he was providing financial advice.
Having regard to the nature of the relationship between the Applicant and his clients and the evidence that was presented before the Tribunal, I cannot accept that the Applicant did not consider himself to be providing some form of recommendations in relation to the loans that the clients were making to Vista. The clients were on the whole not sophisticated investors and the Applicant should well have understood their vulnerabilities in matters relating to their finances. This would certainly have been true of Ms Mead and probably Mrs Eldridge. I accept that Mr Bron was more aware of the relevant issues but he nonetheless did seem to look to the Applicant for guidance in relation to the investment in Vista.
I find this ground established on the facts.
I would add, however, in relation to each of grounds 1, 2 and 3 that it is quite remarkable, almost to the point of not being entirely believable, that a man who has been involved in the finance industry for over 25 years and who has been responsible for orchestrating borrowings from clients in excess of $30 million, had not the slightest idea that he was required to hold a financial services licence to carry out the very substantial borrowing activities which he oversaw. During his evidence he was asked a number of times whether he had any idea that there was such a requirement and he consistently answered that he did not.
This is difficult to accept at face value but if it is true, it demonstrates at the very least a lack of any appreciation by the Applicant of the regulatory framework within which he operated. This is a matter of great concern and would, in my mind, be reason enough on its own to impose a ban of some duration.
Ground 4
The Respondent asserts that the Applicant contravened section 1041H of the Act which states as follows:
1041H Misleading or deceptive conduct (civil liability only)
(1)A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.
Note 1: Failure to comply with this subsection is not an offence.
Note 2: Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4.
(2)The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following:
(a)   dealing in a financial product;
(b)   without limiting paragraph (a):
(i)    issuing a financial product;
(ii)   publishing a notice in relation to a financial product;
(iii) making, or making an evaluation of, an offer under a takeover bid or a recommendation relating to such an offer;
(iv) applying to become a standard employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993) of a superannuation entity (within the meaning of that Act);
(v) permitting a person to become a standard employer-sponsor (within the meaning of the Superannuation Industry (Supervision) Act 1993) of a superannuation entity (within the meaning of that Act);
(vi) a trustee of a superannuation entity (within the meaning of the Superannuation Industry (Supervision) Act 1993) dealing with a beneficiary of that entity as such a beneficiary;
(vii) a trustee of a superannuation entity (within the meaning of the Superannuation Industry (Supervision) Act 1993) dealing with an employer-sponsor (within the meaning of that Act), or an associate (within the meaning of that Act) of an employer-sponsor, of that entity as such an employer-sponsor or associate;
(viii) applying, on behalf of an employee (within the meaning of the Retirement Savings Accounts Act 1997), for the employee to become the holder of an RSA product;
(ix) an RSA provider (within the meaning of the Retirement Savings Accounts Act 1997) dealing with an employer (within the meaning of that Act), or an associate (within the meaning of that Act) of an employer, who makes an application, on behalf of an employee (within the meaning of that Act) of the employer, for the employee to become the holder of an RSA product, as such an employer;
(x)   carrying on negotiations, or making arrangements, or doing any other act, preparatory to, or in any way related to, an activity covered by any of subparagraphs (i) to (ix).
…
The Applicant denies much of what the Respondent alleges in relation to this ground.
In particular, he denies any suggestions that he indicated to any of Mrs Eldridge, Mr Bron or Ms Mead that the loans made by Vista would be secured by way of first mortgage or that there was little or no risk involved in making loans to Vista or that the loans to Vista were safe.
The evidence of all three witnesses called by the Respondent was that to varying degrees that the Applicant had indicated to them that the loans were safe and low risk and in at least one case that the loans by Vista to third parties was secured by way of first mortgage.
There are no written notes to confirm the position adopted by the Applicant – he kept no contemporaneous record of any conversations which might contradict the views expressed by the three witnesses.
In relation to those three witnesses it must be acknowledged that Ms Mead was not a particularly satisfactory witness having regard to the fact that she was the ex-wife of a witness who was appearing for the Applicant and she clearly was unfavourably disposed both towards her ex-husband and the Applicant.
Mrs Eldridge was clearly less jaundiced in her view of the Applicant, but at times appeared to be confused about exactly what had transpired during the course of the lending arrangements which she undertook with Vista.
Mr Bron was undoubtedly the strongest witness for the Respondent and spoke clearly and definitively about his recollection of the relevant events.
While acknowledging the problems in relation to the evidence of Ms Mead and less so of Mrs Eldridge, it is the case that there is broad consistency between these witnesses’ statements and their verbal evidence about the Applicant’s representations about the risk associated with the making of loans to Vista. Furthermore, the Applicant’s written statement and verbal evidence in this context was less than persuasive – he indicated that he did not feel that he needed to explain to prospective lenders what Vista was doing and did not tell them a great deal about the security or about the nature of Vista’s investments which included motels.
In terms of section 1041H of the Act, I would, on balance, agree that at the very least the information which the Applicant did provide to the lenders was likely to mislead or deceive those lenders.
Ground 5
The Applicant accepts that he is not adequately trained and is currently not competent to provide financial services and has indicated that he will undertake a course or courses to correct this position. To date, no such courses have been undertaken as far as the Tribunal is aware.
Ground 6
This ground is to the effect that the Applicant is not a person of good fame and character. I have already commented on the oddity that a finding to this effect would result in a permanent ban, an outcome which the Respondent is not suggesting. Nonetheless, I make the following comments.
The Applicant provided a number of written references – they were all clearly templates based on a pro forma reference which appears to have been drafted by the Applicant and they do not meaningfully appear to be the words of the referees themselves.
However, the verbal evidence of the two witnesses called for the Applicant, namely, Mr Mead and Mr Shepherd were strong and generally were supportive of the Applicant.
Quite apart from the references provided, it is important that up until the events the subject of these proceedings occurred, there were no matters of concern raised in respect of the Applicant and certainly no convictions for any offences relating to his involvement in the corporate life of the relevant entities. His record by all accounts was unblemished and no complaints appear to have been made against him to any relevant authority.
He was involved in certain charitable activities and contributed well to community life.
Having regard to all that I have said above, I have accepted that the Applicant has not provided adequate attention to the needs and concerns of his clients and that he has failed to operate and he has caused companies associated with him to fail to operate with the required regulatory authorisations etc.
That, however, does not automatically lead to the conclusion that he is not of good fame and character.
Based on the matters raised above, in particular the supportive witness statements and the fact that no allegations of dishonesty has been levelled at the Applicant, I find that this ground is not made out by the Respondent.
Ground 7
This ground calls upon the Tribunal to assess whether it has reason to believe that the Applicant is likely to contravene a financial services law in the future.
Of relevance to this issue is the fact that the Applicant has indicated that he is very sorry that the lenders lost any money by lending to Vista: para 5 of the witness statement of the Applicant dated 10 April 2015.
However, the level of his contrition appears to quite restricted. He does not appear to be apologetic about his own conduct and the way in which that conduct may have contributed to those losses in that he failed to provide adequate warnings to the lenders in relation to the risk associated with the investment they were making.
In this regard I further note that the Applicant:
·was not aware of the relevant laws but now asserts that he is acutely aware of such laws; and
·has suffered considerably from the publicity surrounding the failure of Vista and the consequent proceedings and the time and cost of these proceedings.
I would very much doubt that he would have the desire or the inclination to contravene a financial services law in the future. He is not, in my view or, I believe, in the view of the Respondent a person of dishonesty or deliberate malicious intent.
Accordingly, I conclude that he is not likely to contravene a financial services law in the future.
I find this ground not to be established.
WHAT IS THE APPRPOPRIATE LENGTH OF THE BAN?
In this case, I am dealing with a banning order in respect of an individual who is not alleged to have acted dishonestly and does not appear to have ultimately profited from the misfortune of those that have lost money.
That, however, is not the end of the story. In Australia the legislature has gone further and put in place a comprehensive regulatory framework that is intended to protect the investing public even from people who are not necessarily dishonest but who provide financial services. This is done by ensuring that they have the appropriate licences and authorisations and appropriate training.
In this case, a number of grounds that have been established are specifically dealing with a failure by the Applicant to understand that regulatory framework and his obligations within it.
In determining what should be an appropriate banning order I am mindful of a number of matters which have been identified by Santow J in Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 as being relevant to the Tribunal’s consideration. In particular:
·banning orders are designed to protect the public from harm;
·the banning order is protective against present and future breach;
·a banning order has a motive of personal deterrence, though it is not punitive;
·in assessing the fitness of a person to provide financial advice it is necessary that they have an understanding of their role and obligations;
·in assessing an appropriate length of prohibition, consideration has to be given to the degree of seriousness of the contraventions, the propensity that the person may engage in similar conduct in the future and the likely harm that may be caused to the public;
·longer periods of disqualification are reserved for cases where contraventions have been of a serious nature such as those involving dishonesty;
·it is necessary to balance the personal hardship to the defendant against the public interest and the need for protection of the public from any repeat of the conduct;
·a mitigating factor in considering a period of disqualification is the likelihood of the person reforming;
·it is necessary to assess matters such as the character of the person, the nature of the breaches, the risks to others from the continuation of the person as an authorised representative of a licensed person and the honesty and competence of the person;
·where large financial losses are involved a longer period ban is often appropriate.

Having canvassed the grounds in detail, there are a number of factors which are in favour of imposing a ban at the lower end of the scale. Most significantly, I note the following matters:
·there is no evidence or allegation of actual dishonesty on the part of the Applicant and no suggestion that he participated in any form of falsification of documents;
·there is no suggestion of any previous misconduct by the Applicant;
·there is no suggestion that there have been complaints regarding the Applicant despite the fact that he has been involved in business affairs for many years;
·there is no suggestion that funds which were lost as a result of the matters canvassed in this proceedings were in any way turned to the benefit of the Applicant or anyone associated with the Applicant;
·the Applicant has conceded a number of points and has accepted that a banning order of some duration is appropriate;
·the Applicant has expressed a level of contrition albeit the Tribunal has some reservations as indicated earlier; and
·there is some evidence to suggest that the Applicant now understands the problems and has taken some limited steps to address his understanding of the regulatory framework.
All that needs to be weighed against the following matters factors which suggest a longer ban should be imposed:
·there have been numerous breaches of financial services laws;
·the breaches were serious and in many instances were repeated over many years;
·the consequences of those breaches to the investing public were and continue to be significant;
·many investors/lenders have lost retirement savings at an age where they are most unlikely to recoup such losses through other activities;
·the Applicant was well aware of those circumstances having been their accountant over many years;
·there was evidence to suggest at the very least a level of disinterest in what might be the appropriate regulatory requirements;
·undoubtedly, the Applicant has suffered hardship as a result of the banning order being imposed but as stated by Santow J in ASIC v Adler, it is necessary to balance the personal hardship of the person against the public interest.
ENFORCEABLE UNDERTAKING
In submissions made on 4 June 2015 the Applicant offered to enter into an enforceable undertaking along the following lines:
The Applicant offers an enforceable undertaking to both do all things reasonably required of him to obtain and also to use his best endeavours to obtain a limited AFS license by 30 June 2016 (limited to those items described as “Provide financial product advice” at Table 1 on page 2 of INFO 179) and for the conditions of any such limited AFS License to be that he is subjected to an annual audit or any such conditions as the ASIC imposes.
The Tribunal rejects the Applicant’s suggestion of an enforceable undertaking having regard to the following matters:
·it would not be an appropriate regulatory outcome having regard to the Applicant’s conduct outlined above;
·there is an insufficient degree of specification about the proposed content of the enforceable undertaking;
·it has not been raised in a timely fashion;
·the Respondent has not had the opportunity to adduce evidence as to the workability or otherwise of such an enforceable undertaking; and
·the Applicant has not explained in any meaningful detail, how supervision and monitoring of the kind required could be made to work at a practical level.
CONCLUSIONS
Having regard to all these matters I conclude that:
·it is not appropriate to accept an enforceable undertaking as proposed by the Applicant, and
·a banning order is warranted.
In the circumstances, I am of the view that a banning order of three years would be inadequate but that eight years is too long. Balancing all the competing factors I believe six years to be the appropriate outcome as that time frame reflects the seriousness of what has taken place but takes into account the factors that operate in the Applicant’s favour.
DECISION
The Tribunal varies the Respondent’s decision by reducing the period of the ban from eight years to six years.

I certify that the preceding 104 (one hundred and four) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President
............[sgd].......................................................
Associate
Dated 17 September 2015

Dates of hearing 12 and 13 May, 15 June 2015

Counsel for the Applicant Mr G McDonald

Counsel for the Respondent Ms M Avenell

[2015] AATA 720

17 September 2015

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Division	TAXATION & COMMERCIAL DIVISION
File Number(s)	2014/6261
Re	Dimitri Amargianitakis
APPLICANT
And	Australian Securities and Investments Commission
RESPONDENT

Tribunal	Professor R Deutsch, Deputy President
Date	17 September 2015
Place	Sydney

Dates of hearing	12 and 13 May, 15 June 2015
Counsel for the Applicant	Mr G McDonald
Counsel for the Respondent	Ms M Avenell